Category Archives: General Investing

General Investing

TFSA vs. RRSP

The Federal Government introduced the tax free savings account in their last budget. Basically any Canadian citizen over the age of 18 can open an account and is allowed to deposit $5,000 per year. Any unused portion of the $5,000 in a given year can be carried forward. The account has no impact on RRSP yearly contribution eligibility. All income earned by the funds in the account are tax free and can be taken from the account at any time.

RRSPs have been the most widely used form of saving for retirement. People like you and I blindly scramble towards the end of February each year to purchase RRSPs from our bank or financial planner so that we can get a small tax break. The majority of people investing this way do not have any idea what their RRSPs are actually being invested in. In many cases when the funds actually do show a return, that return sits idly in the RRSP account and is not put back to work earning more dollars for the investor. Many people are in for a shock when they retire as taxes can reduce the face value of the RRSP account by as much as 39%. Imagine planning to have a million dollars to carry you through your retirement years only to find out that after taxes you actually have $610,000. The other consideration that one must look at is the fact that the RRSPs are usually purchased with after tax dollars and those same dollars are taxed again when the account is liquidated.

Bankers are programmed to sell RRSPs and are generally quite good at it. They however, have failed miserably in selling the tax free savings account product. The returns offered on tax free savings accounts by the banks are nominal at best and in many cases just cover the bank fees on the account. A number of investment companies offer products with higher yields and should be considered as a legitimate alternative.

The best way to compare RRSPs to the tax free savings account is by way of an example:

The client has decided to invest $5,000 per year for the next 5 years at which point the investment will be cashed in. The rate of return for both products is 7.0%. The example assumes that the client will reinvest yearly earnings. The tax rate used is 39%.

RRSP TFSA
Year 1 $5,350 $5,350
Year 2 $11,075 $11,075
Year 3 $17,200 $17,200
Year 4 $23,754 $23,754
Year 5 $30,767 $30,767

Taxes on the RRSP balance will be $11,999 leaving the client with $18,760 for his 5 year investment of $25,000. As there is no tax on the tax free savings account the ivnestor will have $30,767 from his $25,000 investment. One might argue that the tax deduction created by purchasing an RRSP should be part of this equation. However, then one would have to calculate the initial income tax paid to earn the investment funds. These numbers basically cancel each other out.

The bottom line is that the federal government has provided Canadians with a way to accumulate tax free dollars. In order to take full advantage of this product the general public will have to consider alternative investments offered by private investment companies.

General Investing

Tips For Investing in Silver

Investing in silver is popular way chosen by many people to hedge against inflation and build up a strong portfolio. However, there are several things to know about investing in silver. Though it is a precious metal like gold, the market characteristics are very different. It is best to do your homework thoroughly before entering the market.

Different forms of silver investments

Silver bullion is the most traditional way of investing. If you want to physically own the silver, you can opt to buy silver bars or coins. The bars are flat rectangular pieces of the metal which come in different sizes ranging from 1 troy oz bars to 1000 troy oz bars. You can store these bars in the safe of your home or at the banks. These are far easier to buy than gold bars.

Another type of silver investment is coins. You can purchase the Canadian Maple Leaf or the American Eagle coins as a part of your investments. But it is better not to aim at old and rare collector’s coins because you will find it difficult to both buy and sell. The value of a coin is determined by the value of the intrinsic amount of silver in it.

It is much more convenient to buy silver exchange traded fund or ETF. The largest silver ETF is the iShare silver trust.

Silver Certificates show how much silver you own on a paper. They are easy to store, buy and sell.

Swiss banks allow you to have silver accounts. You can buy and sell silver on these accounts rather like foreign exchange.

ETF and Silver bullion are the best options for silver investments, but you should know that in the USA, if you own a silver item for over a year, it is considered to be collectible. So, any gains that you make from selling it will be taxed at a far higher rate. So, bullion may not be suitable for the long-term investment if you are looking to invest in silver over a long period of time then silver ETF would be the better option.

Facts about investing in silver

Silver prices are much lower. So, they are far more accessible to the ordinary investors than gold.

The amount of silver bullion actually traded in the market is far less than gold. This increases the risks of investing in silver.

The price of silver is far more volatile than gold and it changes quite drastically in response to demand and supply. So, the silver market is less stable than gold.

In many countries, gold enjoys a special tax status but silver does not. For example, in the European Union, trading in gold bullion is exempt from VAT but not silver.

Though the price of silver generally follows that of gold, it is regarded as a less effective protection against inflation than gold.

Silver investments may be quite suitable for people with limited funds who are looking for an assured profit, provided you follow the standard safeguards in buying and selling.

General Investing

The Investment Appeal Of American Gold Eagles

There are several countries that mint Gold coins presently, however, the most widely accepted and demanded are the American Gold Eagles. These coins are guaranteed as to gold purity and weight content by the U.S. Central Authority. It has not always been this way the South African Krugerrand was the coin of choice for investor for many years, that was until 1985 when the U.S. started minting their own coins

The American Eagles is 22 Karats and is minted with two other metals to make it firmer and last longer. The other metals Silver and Copper are mixed in very small amounts, that is the coins is 23 parts gold and 2 parts of the other materials.

These coins are widely accessible from dealers and the U.S. Mint, although there have been period when the mint has stopped producing them due to high demand and shortage of metal. In small quantities they are easily to store and transport making them a great investment. As gold has gone up substantially in the past decade the coins have become even more popular. These coins are highly liquid and marketable and buying and selling these coins are relatively easy and can be down quickly.

The coins are minted in different a size, which makes them affordable to most. They come in 1 ounce or $50 denomination, ½ ounce or $25 denomination, ¼ ounce or $10 denomination and 1/10 of an ounce or $5 denominations. The different size has also made them appealing since several coins from other countries are not available in all sizes and one can begin investing in gold in small amounts.

These coins are considered bullion coins and are priced for their gold content not rarity or age as numismatic coins are. Earlier United States coins are considered numismatic and are priced based on several factors including age, grade and rarity. The gold Eagle have their counterpart in silver or the Silver American eagles that are also available in the same sizes and denominations. If you is going to invest in gold in this manner they must take in consideration that when you have a large quantity you have the appropriate safe storage location. Also in larger quantities it becomes more difficult to transport.

It comes down to matter of personal preference. If you would like to invest in gold and silver, but prefer to have the actual bullion in your possession. Then the American Eagles are a very good and logical choice.

General Investing

Simple To Use Stock Investing System Programs

Share trading strategy software could get incredibly difficult. It will be able to make you place in all your trading data and can give you exact advice on where to put your capital. You can find, though, further streamlined options that permit you to make several decisions on your own, in accordance with your own goals and needs. If you don’t like dealing with computers too much or if you only desire to be free to generate your own choices, you may prefer to opt for the simpler share trading software that’s out there.

The quite simplest trading software just sends you emails or messages once it’s time to move your money around. This type of software does all the complicated analyses, however it offers you a super simplified version of it. As an example, it would explain to you to move your money into fund positions or short positions, according to what the marketplace is doing. This still provides you a lot of room to make personal decisions within this, but it also provides you the indicators you require to succeed in the share marketplace.

Even the simplest software solutions will probably give you a couple of separate options on ways to move your money. You might have a more aggressive option and a slower growth option that protects your fund a little better. Based on the forms of changes that are taking place, the moves to make for every option would be slightly separate. It’s great in case you have these choices, so that you’ve even further leeway to make stock investing decisions that are in line with your needs and goals.

Fast to utilize stock investing strategy software won’t have to trading your shares and moving your fund every other day. You must have software that’s natural in reading marketplace indicators and that simply averages related to one trade per month. Trading too often isn’t just complex and time consuming, on the contrary it’s also a good method to waste fund. You want to work with software whose algorithm doesn’t prompt you to trade all of the time, or you’ll simply end up attaining frustrated and losing too much funds.

Even those who are leery of computers and software will be able to find out to use the simplest share trading system software. Today’s streamlined technology takes the guesswork both out of trading and out of using the formula you should have to generate your trading better.

General Investing

Calculating Profit of Term Deposit

Investing money in term deposit is a safe and guaranteed way to get higher interest for your excess money. Time deposit or certificate of deposit is a bank product nearly similar to savings account but money on time deposit is on lock-in period before you can get it.

One disadvantage of putting money in time deposit is that you will be burdened a penalty if you get your money before the finish date. So you should not put all your savings in time deposit, you should put aside a particular amount of cash in your bank account.

The valuable thing in putting money in time deposit is knowing how to compute the interest you can get in inveting a particular amount of money in a term deposit. Once you know the interest you will receive, you can have a clue how much money you will invest in time deposit.

Term deposit is one of the guaranteed investments you can do for your money. In the Philippines, term deposit is insured up to P500,000, meaning you will not lose your capital invested in term deposit.

To calculate the total profit in time deposit, you may use the equation underneath:

Net Interest = [(principal x rate x days) / 365]*0.8

0.8 comes from 1 minus 20% withholding tax

For example: P2,630 = [(P1 million x 0.04 x 30) / 365 ]* 0.8.

From the formula above, you may observe that to increase your net gain in investing in time deposit, you must increase the days of time deposit and the principal money you will invest. The interest rate of time deposit rest on the withholding period. Obviously, the better the period, the higher the interest rate for term deposit will be.

These days you can choose where to invest your money depending on the risk level and the percentage of profit. Several investments are very risky, others are normal or without risk at all. Investing in term deposit is one of the investments with no risk at all since it is insured by the government.